I NSTITUTE
FOR
R ESEARCH
ON
E DUCATION P OLICY & P RACTICE
Informing change & promoting innovation through rigorous & collaborative research
Financing School Facilities in California
By Eric J. Brunner, Department of Economics, Quinnipiac University
This study provides a comprehensive review of California’s system of school facility finance.
Along with describing that system, it examines the state’s investment over time and provides
an analysis of the relationship between the revenues available to school districts and various
district characteristics. The study attempts to answer five broad questions related to the way
California finances its school facility needs:
1. How has the level of school facility funding changed over time and how does it compare
to the level of funding in other states?
2. How is the level of school facility funding distributed across school districts?
3. What are the primary causes of inequities in school facility funding across districts?
4. Is facility funding reaching those districts with the greatest facility needs?
Getting Down to Facts
A research project designed
to provide California's policymakers and other education
stakeholders with comprehensive
information about the state’s
school finance and governance
systems, and lay the groundwork for a conversation about
needed reforms. The project
was made possible by grants
from the Bill & Melinda Gates
Foundation, the William and
Flora Hewlett Foundation,
the James Irvine Foundation,
and the Stuart Foundation.
This summary was prepared
by IREPP.
For the full text of the author’s
research report and the other
studies in this project, see:
www.irepp.net
For background on California’s
school finance system, see:
www.californiaschoolfinance.org
Institute for Research on
Education Policy & Practice
520 Galvez Mall, CERAS Building
Rm #518
Stanford, CA 94305
650.736.1258
IREPP@suse.stanford.edu
5. How do charter schools obtain funding for school facilities, and what are the special
issues related to charter school facility finance?
Summary of Key Findings
California’s system for financing
school facilities is best described
as a partnership between the state and
local school districts. The state provides districts with financial support
for new school construction and modernization projects through the School
Facility Program (SFP). It funds this
program through statewide, voterapproved bonds. Local school districts finance their share of school
construction and modernization
project costs primarily with revenue
raised through local general obligation
(G.O.) bond elections.
School facility funding has increased
dramatically in recent years,
surpassing the national average
Between 1960 and 1982, spending
per pupil on school facilities in
California consistently fell. Although
spending gradually rose after 1982, it
has until recently lagged behind the
rest of the nation and even further behind states with similar enrollment
growth trends. In recent years, the
funding level changed dramatically.
Study Methods
This report is an historical review of school facility finance
in California, including a review of assessments of the
system by several organizations. Along with documenting
California’s current system of school facility finance, the
report examines the level and distribution of school facility
funding since 1998.
Data sources for this report include:
●
California Department of Education (CDE) for data on facility spending over time, developer fee revenues, and
other sources of facility revenues.
●
U.S. Department of Commerce, Bureau of the Census, for
●
Office of Public School Construction for data on apportion-
data on facility spending in the United States.
ments of state bond funds.
●
EdSource for data on local bond election passage rates
and revenues.
The per-pupil revenue calculation:
For the district-level comparisons of revenues after 1998,
per-pupil revenue is measured as the sum of all revenue
raised between 1998 and June 2006 (measured in constant
2005 dollars) divided by the average district enrollment over
the time period.
Figure 1 • Sources of School Facility Funds in California, 1998 to June 2006
Mello-Roos/SFIDs
1%
Other **
6%
Developer Fees
9%
Local G.O. Bonds
54%
State Aid (State Bond
Apportionments)*
31%
Local G.O. Bonds
State Aid (State Bond Apportionments)*
Developer Fees
Mello-Roos/SFIDs
Other**
$38.4 billion
$21.9 billion
$6.2 billion
$0.7 billion
$4.0 billion
Total
$71.2 billion in constant dollars*
Policy decisions since 1998 led to the
increased investment
The bulk of funds for school facilities come from local general obligation bonds and state bond proceeds. However, the developer fees that districts are allowed to levy on residential and commercial
construction also contribute a significant amount. Mello Roos elections and School Facility
Improvement Districts (SFIDs), which place levies on just a portion of property in a district, are relevant for only a small portion of districts in the state.
* All dollar amounts were calculated in constant dollars for purposes of the study analysis. In addition,
the total for State Aid reflects funds apportioned, not the total amount of voter-approved bonds.
** Includes Certificates of Participation, sale or lease of land/buildings, federal aid, and other small
sources of revenue as reported on school district accounting records and prepared by the California
Deptartment of Education.
Note: The percentages do not add up to 100% due to rounding.
Figure 2 • Largest Sources of Facility Revenues per Pupil by Type of District,
1998 to June 2006
Revenue Source
Unified
Districts
Elementary
Districts
High School
Districts
Local G. O. Bonds
State Aid
Developer Fees
$4,051
3,496
1,175
$3,293
3,429
1,077
$6,951
4,735
1,408
Number of Districts
Average Enrollment
331
12,896
548
2,127
83
6,273
Since 1998, the level of state and local
support for K–12 school facilities in
California has been substantial. Through
June 2006 voters have approved
$28.1 billion in statewide general obliga-
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Financing School Facilities in California
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tion bonds and an additional $36.0 billion in local general obligation bonds to
support school construction and modernization projects throughout the state.
As a result, the level of spending per
March 2007
pupil has surpassed the national average
and is now comparable to the level
found in other states with similar enrollment growth rates. For the years 2000 to
2004, for example, California spent
$1,364 per student compared to the average among all other states of $1,192.
Changes in state policy have had a
direct effect on the state’s facility
finance system and funding levels. The
passage of Proposition 1A in 1998 created the School Facilities Program
(SFP) to streamline the process districts
go through to obtain state funding.
Under the SFP, the state provides funding for new construction and modernization in the form of per-pupil grants.
In most cases, projects also require
local matching funds. The SFP also
made numerous reforms designed to
streamline the application process, simplify the state facilities program, and
create a more transparent and equitable funding mechanism. Then, in
2000, voters passed Proposition 39.
This initiative made it possible for
school districts to pass local bonds
with a 55% approval under specific
conditions instead of the two-thirds
vote previously required.
Along with increasing the funding
available for school facilities, these actions together appear to have changed
the proportion of facility funding that
comes from specific sources. Prior to
1998, local bond elections provided
about a third of total facility funding.
That share has grown to more than
half. (See Figure 1.)
The level of facilities funding varies
widely across school districts
This study found that revenues per
pupil for school construction and modernization vary widely among districts.
The study examines these differences
based on district characteristics, looking
first at the variations among elementary, unified, and high school districts.
Figure 2 shows the variation if one
divides all revenue raised between
1998 and June 2006 by the average enrollment over the time period in each
type of district.
These averages only partially reveal
the variation in the passage rates and
funds from local general obligation
bonds among the three types of school
districts.
● For unified districts, 57% (188 out
of 331) held at least one successful
bond election between 1998 and
2006; and among the districts that
passed bonds, the average amount
raised per pupil was $7,134.
● For elementary districts, 30% (166
out of 548) held a successful election, and those districts raised an
average of $10,872 per pupil.
● For high school districts, 58% (48
out of 83) held a successful election,
and those districts raised an average
of $12,019 per pupil.
These disparities in the distribution of
local general obligation bond revenue
also account for a large part of the difference in total revenue that exists within
each of the district types. For example,
in unified school districts, the difference
between the 75th and 25th percentiles
of facility revenue per pupil (total revenue raised over the period 1998–2005
divided by student enrollment) is more
than $10,000. Similar disparities in facility funding exist among elementary
and high school districts.
Funding disparities are related to
need and, more strongly, to districts’
ability to pay
As Figure 3 shows, the study examined
the relationship between facility revenues
and measures of school district need,
wealth, and student ethnicity.
The data show that part of the variation across districts in facility funding
is due to differences in need. Districts
with higher enrollment growth rates
and those that have not invested heavily in school facilities in the recent past
Figure 3 • Predicted Total Facility Revenues per Pupil
Variable
Predicted Revenue
25th Percentile
Predicted Revenue
75th Percentile
75th Minus 25th
$3,144
4,218
$3,741
3,016
$ 597
-1,202
2,590
3,283
4,654
3,802
2,064
519
Need
Enrollment Growth
Prior Investment
Ability To Pay
Assessed Value per Pupil
Income
Both measures of need and measures of ability to pay appear to be important determinants of the distribution of facility funding.
The first column identifies the variable that is being measured, such as the level of enrollment growth. The
second column (25th percentile) represents the lower end of the distribution of school districts for each
variable; i.e., districts that are not showing much enrollment growth. The third column (75th percentile)
shows the higher end. The fourth column represents the difference in predicted total revenue between the
lower and higher ends. For example, with enrollment growth, districts with higher growth tend to have more
revenue per pupil for facilities. However, districts that have previously invested in facilities tend to have less
revenue.
Data Note: Using coefficient estimates from a model designed to explain total revenue per pupil, this study predicts
how various factors affect the distribution of total revenue per pupil. The data show how moving from the 25th percentile of a given variable to the 75th percentile affects the level of total facility funding per pupil while holding all the
other variables constant (at their means).
tend to have substantially higher revenue per pupil. In particular, state G.O.
bond apportionments increase steadily
along with enrollment growth, but
local G.O. bond revenue is only weakly
related to growth.
Ability to pay, whether measured
by local income levels or the assessed
valuation of property within a school
district, appears to be related to facility revenues. In particular, disparities
in school facility funding across districts are systematically related to the
assessed value of property within districts. Districts with higher assessed
value per pupil are able to raise substantially more revenue through local
general obligation bond issues and,
consequently, tend to have substantially higher total revenue per pupil.
The same is true, but to a lesser extent, in regard to districts with high
median household incomes.
There appears to be little relationship
between facility revenue and the ethnic
composition of districts. If anything,
districts with higher concentrations of
minority students tend to have higher
facility revenue per pupil.
Districts with the greatest facility
needs are receiving more funds
per pupil
The variations in district funding
noted above raise the question of
whether districts with the most critical
facility needs receive higher levels of
facility funding. The state has two objective measures of facility need that
could be used to address this question:
the CDE classification of Critically
Overcrowded Schools and schools that
operate on a multitrack, year-round
schedule (MTYRE).
This issue is of particular concern
because a disproportionate number of
March 2007
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Financing School Facilities in California
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3
nonwhite and low-income students attend these schools. Among schools on
a multitrack, year-round schedule or
classified as critically overcrowded, the
average percentage of students qualifying for free or reduced price lunch
is 73%. Among all other schools, that
percentage is only 45%.
Critically overcrowded schools have higher
facility funding
In 2002 the state Legislature created
the Critically Overcrowded Schools
(COS) program to help direct state aid
toward districts with the greatest facility needs. The program was funded
with $4.1 billion of bond revenue from
Propositions 47 and 55. To qualify for
COS program funding, a school must
have doubled the state’s recommended
density of students per acre.
This study found that districts that
contain critically overcrowded schools
tend to have higher facility revenue
pupil. For example, among the 42
districts that contain critically overcrowded schools, local bond revenue
between 1998 and the present averaged
$5,722 per pupil and total revenue per
pupil averaged $11,323. In other districts,
local bond revenue averaged $3,825
and total revenue averaged $9,061.
Thus, on average, total revenue per
pupil is approximately 25% higher in
districts that contain critically overcrowded schools.
It is noteworthy that Los Angeles
Unified School District contains nearly
50% of all critically overcrowded
schools and has experienced a particularly large increase in facility funding.
In that district, total facility funding
per pupil is more than twice the
statewide average, and local bond
revenues are more than four times the
average among all other districts.
Multitrack, year-round schools trade
facility funds for operating revenue
Multitrack, year-round calendars
allow schools to increase their seating
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Financing School Facilities in California
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capacity by 30% or more by placing
students into tracks and then rotating
those tracks throughout the year.
Thus, at any given point in time, students in one track are on vacation
while those in other tracks are attending classes. In 2004–05, 751 schools—
serving
approximately
804,000
students—were operating on a multitrack, year-round calendar.
Districts that implement a multitrack
calendar are eligible for additional
operational funding. The Year Round
Grant Program provides additional
funding based on the percentage of
pupils certified in excess of facility capacity. The amount of the grant increases with the percent of students
housed in excess of facility capacity.
Districts that receive funding under the
Year Round Grant Program have their
new construction eligibility in the SFP
program reduced based on the number
of pupils for whom they have received
funding. Thus, school districts that participate in the program are voluntarily
choosing to reduce their eligibility for
new school construction funding.
Funding options for charter
schools have improved, but
challenges remain
During the 1990s, charter schools
faced significant barriers to obtaining
adequate school facilities. Under provisions contained in Proposition 39,
passed in 2000, it became the legal responsibility of school districts to make
every reasonable effort to house charter school students in facilities essentially equivalent to those used to house
other district students. In recent years,
the government has also established a
number of grant and loan programs
to help charter schools obtain adequate facilities. Although the facility
dilemma facing charter schools has
improved, surveys of charter school
operators since 2002 indicate that they
still struggle to finance their school
facilities needs.
March 2007
Author’s Conclusions
The author concludes with a discussion of how this study’s findings relate to important recent reports on
the school finance system by the
Legislative Analyst’s Office (LAO), the
Little Hoover Commission, and others. He observes that important policy
challenges documented in those reports remain to be addressed, even
given the recent increase in facility
funds. Several reports suggest, for example, that the state develop a more
predictable and consistent method of
financing school facilities. Others call
for further streamlining of state
oversight of school facility projects.
Consistent with this study’s finding
that funding for facilities tends to vary
systematically with district property
wealth, the LAO and others have recommended actions to equalize the ability of school districts to raise general
obligation bond revenue. The author
also raises the need to expand the
definition of Critically Overcrowded
Schools, in part to address questions
related to schools on a multitrack,
year-round schedule.
The state has made more progress in
responding to two other facility concerns. It has adapted to changing enrollment trends by putting a stronger
emphasis on modernization versus
new construction. And it has taken
some initial steps toward the creation
of a statewide school facility inventory system, including the expected
September 2006 adoption of a state
standard for good repair.
Eric Brunner, associate professor of
economics at Quinnipiac University,
holds a Ph.D. from the University of
California, Santa Barbara. His research
interests include K–12 education finance, intended and unintended consequences of school finance reform, and
the political economy of school spending and school choice. This study was
completed in October 2006.